2020 has taught us much about travel and the need for an excellent insurance policy should the unexpected arise. While seasoned travelers have long known about the importance of trip cancellation insurance, others are just coming to appreciate the necessity of these policies.
As travel restrictions continue to fluctuate around the world, it can be challenging to anticipate what your safest options are when it comes to booking a trip. After all, these policies can change drastically, leaving passengers in a financial lurch.
You'll never face this problem with the right trip cancellation insurance, however. With that in mind let's take a closer look at what you need to know about this added protection for your next trip.
What Is Trip Cancellation Insurance?
It's a policy that reimburses you for pre-paid, non-refundable travel expenses (e.g. airline, train, cruise, hotel, etc.). To qualify, you must cancel your trip before departure for an unforeseen covered reason.
Think of it as cancellation coverage. Only it covers you while you're on your trip should a list of possible reasons occur.
Should one of these covered reasons arise, and you must return home, trip interruption insurance will reimburse you for the lost portion of your trip. It may also cover additional expenses related to organizing a last-minute flight back home.
Trip cancellation and trip interruption insurance may be sold together as a bundle. In many cases, you also have the option of adding travel medical insurance to the bundle.
As you can see, these policies provide added peace of mind should something unexpected happen during your trip.
In the age of COVID-19, travellers must rely on these policies now more than ever. With that in mind, let's explore the reasons you might need this coverage.
What's the Difference Between Trip Cancellation and Trip Interruption Insurance?
Before exploring travel insurance and its many benefits, let's take a moment to drill into the differences between the two.
Trip Cancellation Insurance Policy
Trip cancellation insurance covers the reimbursement of non-refundable, prepaid trip costs when you can't take a trip. To qualify, the reason for your cancellation must adhere to a predetermined list. These reasons vary by policy.
How long does a trip cancellation policy protect you? From the day after you purchase a policy until you depart on your vacation. After you've left on your trip, this insurance coverage ends.
What if you're travelling to multiple destinations? It's still considered one trip and coverage ends at the time of your initial departure.
Trip Interruption Insurance Policy
How does trip interruption insurance fit into the mix? Coverage begins at the time of trip departure. It protects you in case you need to return form your vacation early.
What does this insurance cover related to trip interruption? It pays the cost of travel arrangements for you to return home.
Some policies also offer coverage so that you can rejoin your trip later. This applies to those who miss a scheduled departure due to a covered reason.
Trip Cancellation vs Trip Interruption Insurance: Covered Reasons
You'll find that the reasons outlined for trip cancellation coverage are typically the same as those for trip interruption insurance. There are differences, however, between the companies offering these policies.
What are some of the most commonly cited reasons to apply for coverage? They include events such as injury, illness (e.g., acquiring coronavirus), a travel company that ceases operation, acts of terrorism, layoffs, natural disasters (e.g., hurricanes), and bad weather.
What about things that aren't covered under travel insurance policies? Here's what you need to know so that you don't have any unpleasant surprises later. Take a look at the differences between travel insurance and international health insurance.
Reasons for Cancelling or Interrupting a Covered Trip
Accepted reasons you may interrupt or cancel a trip vary by policy. Nevertheless, both policy types usually cover:
- Hospitalization or death of a family member
- Unexpected illness or injury of you or a travelling companion, deeming you unfit to travel (by order of a licensed physician)
- Unforeseen natural disasters at home or a destination
- Legal obligation, such as being called for jury duty or to appear as a witness in court.
- Circumstances beyond your control, resulting in the cancellation of the public transportation you've paid for to get to your destination
If you've ever experienced one of these unexpected events while travelling, you already understand how important this type of coverage can be. With the ever-fluctuating world of COVID-19 travel restrictions, you can't do without this added protection.
Some destinations now even require visitors to have travel insurance . These destinations stipulate policies must provide coverage to pay for extended accommodations and medical bills should you contract the virus while abroad.
Which countries have enacted travel insurance requirements amid the pandemic? They include:
- Anguila
- Aruba
- Brazil
- Bahamas
- Cambodia
- Costa Rica
- Jamaica
- Lebanon
- St. Maarten
- Thailand
- Turks and Caicos
- Ukraine
- US Virgin Islands
What kinds of policies does each country require? It depends on which nation you're visiting. For example, visitors to Anguilla and Brazil must have proof of health insurance that will cover all COVID-19-related medical expenses.
Other places, like Jamaica, have introduced a mandatory $40 insurance fee to gain entry. The fee goes towards the "Jamaica Cares" program and is applied to medical services. It covers everything from COVID-related medical expenses to natural disasters.
Some nations also stipulate the amount if insurance coverage you must have. For example, Aruba requires coverage of up to $75,000 and Costa Rica $50,000. Thailand asks for $100,000 in medical travel insurance.
It may surprise some travelers to learn that other countries require travel insurance for non-coronavirus-related reasons. For example, if you travel to any of the 26 Schengen nations, you must carry adequate medical insurance to get a visa.
This proves true for individuals who are traveling for both business and pleasure. Besides the Schengen nations, you'll also need insurance to travel to the following countries:
- Antarctica
- Cuba
- Ecuador
- Egypt
- Japan
- New Zealand
- Qatar
- Russia
- Turkey
- United Arab Emirates
Why do these destinations require coverage? For a variety of reasons. For example, the average voyage to Antarctica costs $14,500, which is why travel insurance is required to protect their financial investment.
Is Trip Cancellation and Trip Interruption Insurance Right for You?
Travel insurance makes sense for a variety of different reasons. After all, the investment associated with booking travel arrangements can be significant. You may not be able to cancel your trip without incurring significant cancellation penalties.
A premature disruption of your trip can come with even more severe costs. Does this mean travel insurance is right for you? The answer to this question ultimately boils down to how much money you are prepared to put at risk.
Other factors to consider are your age, your current health, the current health of your immediate family, and what kind of coverage you have elsewhere. This coverage may be through a credit card, for example.
The following is a good rule of thumb. The larger the trip investment, the more necessary it is for you to purchase trip cancellation and interruption insurance.
What Trip Cancellation and Interruption Insurance Doesn't Cover
To know what policy does and doesn't cover, you'll need to consult its description of coverage. Often times people assume that the following reasons may be claim worthy, but to the insurance company, they most definitely are not:
- Getting detained by customs
- Missing your flight
- Cancelling because of a work obligation
- Cancelling due to an illness or injury related to a pre-existing medical condition not covered
That said, some pre-existing conditions are covered by most travel interruption and cancellation insurance policies. That said, most companies stipulate that the condition be stable for a specific period of time prior to buying the insurance.
In other words, you must take “a turn for the worse” after qualifying for coverage. Depending on your insurer, you may have other restrictions to observe, too.
This may include purchasing your policy by a certain date before departure. This date range typically falls before the cost of what you are insuring is non-refundable. For example, this is when cancellation fees for cruises or hotels take effect.
How Much Does It Cost?
Many consumers have concerns about how much a policy like this will cost them. The final price you pay will depend on various factors, including:
- Your age
- Health
- Trip duration
- Number of people insured
- Cost of your trip
- Provincial sales tax
In general, a combined trip cancellation and interruption insurance plan will run you anywhere from four percent to ten percent of your total pre-paid, non-refundable trip cost.
For example, lets say you purchased a trip costing a total of $5,000. The travel insurance policies available to you will likely range in price from $250 to $500, depending upon variables such as the type of policy you choose. We recommend using a broker to find the best quote possible.
Credit Cards and Trip Cancellation and Interruption Insurance
You may have a credit card that provides travel insurance as a benefit. But you must verify what type of coverage it provides. That means inquiring into what limitations exist and how much protection it provides.
Some credit cards provide trip interruption insurance. This coverage may qualify you for a refund (up to a maximum amount). This coverage will kick in should a covered event happen after your departure.
Other cards, usually those with a higher annual fee, also offer trip cancellation insurance. This also qualifies you for a refund (up to a maximum amount) should a covered event happen before your departure.
It’s important to verify what the maximum limit is for the travel insurance provided by your credit card. That way, you can recover most or all of the costs of your cancelled or interrupted trip.
Your card will cover up to $1,500 per covered person in some situations. Many policies have an overall maximum of $5,000 for all covered travellers. These include those for whom the travel was paid for on the respective card.
If your trip costs significantly more than this, consider buying additional trip cancellation and trip interruption insurance.
Limitations on the Travel Insurance Provided by Credit Cards
What else do you need to know about credit card travel insurance policies? Many have age limits on their trip cancellation and trip interruption insurance. It starts at 65 or 70 years of age.
Some credit cards don't provide any travel insurance. It pays to read your credit card insurance booklet and ask questions if you are unsure of your coverage and the conditions necessary to meet it.
To be covered, you must also charge the entire cost of your trip on the credit card offering these insurance benefits.
The Takeaway
Trip interruption and trip cancellation insurance provide travelers with extra protection when the unexpected occurs. This may include a variety of scenarios from illness to bad weather. natural disasters to terrorist events.
If you've taken risks in the past and travelled without insurance, now's the time to rethink this approach. Not only has the risk of COVID-19 raised the stakes considerably, but many nations now require policies before you may enter their borders.
Where can you find the right travel insurance coverage for your current needs? Insurdinary has you covered. Learn more about how we can help you find the best rates for travel insurance from Canada's best-rate providers.
